Pallete will develop Telefónica with less investment and debt while waiting for Saudi Arabia and the government to move.

D-Day for Telefónica. This Wednesday, the company presented its strategic plan until 2026, with which it aims to convince the market of its future forecast. The appointment comes amid moves announced by STC, the Saudi state-owned operator, and SEPI, the Spanish state-owned company, for a possible entry into the shares of the former public company. This context was flown at a meeting of Spanish multinationals and analysts without mentioning it.

On the contrary, Telefónica today focused on a strategic plan, which its president José María Alvarez Palete summed up with the following phrase: “We are simpler, but stronger.” This was in mind for three years when they divested from many businesses, focusing on four core markets (Brazil, Germany, Spain and the UK) and tech and infra subsidiaries. With this, Telefónica came to the meeting with less debt than in 2019, when it presented a plan that is now expiring, but also with reduced assets.

Over the next four years, Telefónica will develop a similar plan. As a key pillar, the group plans to increase revenue and operating results by 1% and 2% per year, respectively, but will reduce investments required for sales. This is what is known in financial jargon as capex. That is, invest less, earn more and generate more cash flow to be able to reduce debt. The ultimate goal is for debt to be 2.2 to 2.5 times the group’s operating result.

The plan will take effect in 2024, the year the company celebrates its centennial. “We are no longer a telecommunications company, we are much more,” Palete defended in a presentation of the plan to financial analysts who follow Telefonica on the stock market. A speech in which the president once again attacked the regulatory burden on companies in the sector. “I’m in favor of total deregulation,” he said, arguing that the current framework is “outdated.”

One of the strengths of the plan, with which the company intends to convince the market after the evolution of the stock market, which has been burdened by debt and other factors, was the dividend. According to Telefónica, a dividend of at least 0.3 euros per share is guaranteed for the next three years.

The new strategic plan reintroduces several ideas that were already outlined in the previous plan. All of the business it retains in Latin America is considered for sale, and management, until this divestiture takes place, is based on reducing costs, improving efficiency and controlling the impact of currencies on the company’s operations. This new strategic plan once again refers to the “valuation” of these subsidiaries and the search for operations or partners for the future of this business.

As for the low investment, the company explained that the company has “exceeded its highest investment requirements” given that, in its opinion, the new targets also include “a progressive reduction of investment on sales.” in 2026 below 12%. That represents a drop of about two percentage points from the 2023 targets.

As for business forecasts, Teleko predicts that the average annual growth rate of revenue in the retail segment will be 1.5% between 2023 and 2026, while in the business segment (B2B) its calculations suggest that it will reach 5%. to extend the favorable evolution it has been showing in recent quarters.”

The plan also outlines some ideas about his activities in Spain. Telefónica has its main market in its country of origin and maintains that it has the opportunity to grow. Among other things, it aims to improve the revenue per customer, strengthen its continuity and reduce the investment required to achieve sales. Pallete also explained that they are closely monitoring how the sector develops after the operation of Orange and MásMóvil, but defended that they will have to move forward “without recourse”, as divestment is known in the sector to meet the competence obligations. .

Pallete said the company is looking for “growth opportunities” in certain businesses, while envisioning a scenario in which the company’s traditional activities are left behind while new activities emerge that require a tie-up. Similarly, the company has clearly stated in its strategic plan that it will continue to acquire options in Latin America or certain infrastructure assets to continue disinvesting in activities that it does not consider strategic.

At the same time that Telefónica presented its strategic plan, it announced the results of the third quarter of the year. In the first nine months of the year, the group achieved a profit of 1,262 million euros, which decreased by 15% compared to the same period of the previous year. In turn, its revenue increased by 2.4% and exceeded 30,000 million. In the specific case of Spain, Telefónica received a revenue of 9,334 million euros, practically copying last year’s figures. “Commercial activity at the maximum level in recent years, thanks to the attractive evolution of our offer, translates into a positive net profit from all the main services,” the company said in a statement about its activities in Spain.

Source: El Diario

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